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SECURITIES AND EXCHANGE COMMISSION v. DREXEL & CO.

decided: February 28, 1955.

SECURITIES AND EXCHANGE COMMISSION
v.
DREXEL & CO.



CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT.

Warren, Black, Reed, Frankfurter, Douglas, Burton, Clark, Minton, Harlan

Author: Douglas

[ 348 U.S. Page 342]

 MR. JUSTICE DOUGLAS delivered the opinion of the Court.

The question in the case is whether the Securities and Exchange Commission has jurisdiction to pass on a fee to be paid by Electric Bond & Share Co. to Drexel & Co. in connection with a reorganization plan filed by its subsidiary, Electric Power & Light Corp., under § 11 (e) of the Public Utility Holding Company Act of 1935, 49 Stat. 803, 15 U. S. C. § 79a et seq. We hold that the Commission does have jurisdiction.

The problem arises out of the unraveling and reorganization of the vast empire of Bond & Share, pursuant to the command of the Act. The present case is one of several phases of the various reorganization plans adopted to bring the system into compliance.*fn1 The instant phase of this system's reorganization grew out of the filing of a voluntary plan of reorganization under § 11 (e) by Electric.

Electric owned operating subsidiaries in several States and in Mexico. The plan provided that (1) Electric would transfer to a new holding company, Middle South Utilities, Inc., its holdings in those operating subsidiaries, as well as certain other assets; (2) preferred stocks of Electric would be retired by distributing to those security holders shares of Middle South and shares of another subsidiary of Electric; (3) the remaining shares of Middle South and the other subsidiary would be distributed to

[ 348 U.S. Page 343]

     the holders of the common stock and of the warrants of Electric; and (4) Bond & Share would pay Electric $2,200,000 in settlement of intrasystem claims.

The plan filed by Electric under § 11 (e) required Bond & Share to do three things: first, sell or exchange its holdings of Electric stock; second, acquire in exchange the shares of Middle South and the other subsidiary; and third, pay the cash amount in settlement of the intrasystem claims. It was not sufficient for Bond & Share that Electric get approval for its plan under § 11 (e). It was also necessary by the terms of the Act that Bond & Share also get the Commission's approval of the steps required of it.

Bond & Share's exchange of its securities for the new securities was a "sale" under the Act, for "sale" includes "exchange." § 2 (a)(23). Bond & Share is a registered holding company. No "sale" of securities can be made by a registered holding company without Commission approval. That is the command of § 12 of the Act.*fn2 That approval is obtained, as § 12 shows,*fn3 by a procedure which submits the fees in connection with the sale to the scrutiny and approval of the Commission.

Bond & Share's receipt of the new securities was an "acquisition" within the meaning of the Act. § 2 (a)(22).

[ 348 U.S. Page 344]

     That "acquisition" was made subject to the jurisdiction of the Commission by § 9 (a).*fn4 That approval could be had only by submitting the "acquisition" to the Commission's scrutiny pursuant to § 10 of the Act, a scrutiny that includes supervision of the ...


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